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Press Mentions

Ad Age: Why So Many Media Companies Stumble GloballyThe few news brands that have succeeded, to greater or lesser degrees, arguably include CNN, Bloomberg, People, Thomson Reuters, The Wall Street Journal, The New York Times, The Financial Times and The Economist. Other contenders are the Associated Press, the BBC, ABC, NBC, maybe CBS, National Public Radio, News Corp. and the top U.K. dailies, said Ken Doctor, the newspaper veteran who's now an analyst at Outsell. "If a news-media organization sees itself as covering the wider world, sees it as its foundation, that in and of itself differentiates it from all the local media -- newspapers, TV, radio -- out there," he said. "If, in addition, it has substantial reporting and editing resources, then it can play. The tough part is the part we're in: Who wins the race to ubiquity and can make it pay off?"

NYT: If The Globe Were Sold, What Price? “The best guesstimate of the real price: a buck. The best of an announced price: between $50 and $100 million,” he wrote in an e-mail message. The devil will be in the details of the obligations that a buyer would assume, he said, adding that “a buck essentially represents a gentleman’s agreement: I take a liability, headache and a distraction off your hands.”
He said that the Times Company could hang on to some pension liabilities or other obligations in exchange for a higher purchase price, a number that would give the appearance that it was getting something for the more than $1 billion it paid 16 years ago. He added that no bank would be interested in financing a deal given how other deals have blown up, so “the owner’s own money is immediately at risk.”

BizTimes.com: Journal Sentinel faces daunting choices“There’s no strategy – this is panic. What we’re likely to see this year (around the country) and what we’ll see in Milwaukee too is (publishers asking) how much they need to cut back and how much they can do to still hold their place in the market. For publishers, it’s about ‘How do we stay alive and stay profitable until we can get to some sort of breathing period?’ (Economic) recovery will not bring back their old business, but it will give them some breathing room.”

AP: Threat to shut Boston Globe shows no paper is safThe threat to close the paper "sends a very clear message to all employees and unions of surviving newspapers — that this is not business as usual. This is uncharted territory....Newspapers all "have a sword over their heads," said Doctor. If the industry wants to survive, he said, "everyone has to give some blood."

March 2010

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January 18, 2010

Who will be next? And is the mating of banko companies
the look of the next year?

Dean Singleton bit the bitter bullet last week. After
staving off bankruptcy for all of 2009, telling MediaNews execs that the
company would not need to take that route, the company succumbed. MediaNews
is following Morris into bankruptcy, both taking the neater, pre-packaged route,
allowing quicker movement through the courts and, importantly, a continuity of
leadership.

Put together the long list of bankruptcies – Star-Tribune,
Tribune, Philadelphia Media Holdings, Journal Register, Sun-Times Group, Freedom,
Morris, MediaNews and some smaller ones – and you’ve got quite a chunk of
America’s dailies. With MediaNews – publisher of 55 dailies – joining the
second-largest US news publisher Tribune, industry guesses now turn to whether Lee, McClatchy
and Gannett can get to the other side, without a game board stop on the banko square.

That other side, of course, is murky itself, but expect it
to include more newspaper combos. Singleton, just as he was about to wheel his
hard-built company into court, told the Wall Street Journal that he wanted to
be the “aggressor” in the merger of newspaper properties. That’s an unlikely
statement from most CEOs taking their companies into bankruptcies, but it’s
pure Singleton irrepressibility [Excellent piece
by MediaNews alum Martin Langeveld on MediaNews’ spirited 25-year rise at
Nieman Lab]. After all, he and MediaNews president Jody Lodovic are set to
emerge from the bankruptcy maintaining their management of the company (through a special class of stock) and with a 20% ownership stake, as other equity shareholders
– including now-estranged, ex-partner Hearst, Skiffing off in its own direction, get nothing.

So imagine:

In the Twin Cities, the bankers who now own the
Star Tribune decide to throw in their lot with Dean. After all, he’s a
newspaper guy, and they’re not. Sure they’ve hired
a new publisher with intriguing cred, but do they really have the appetite for
a long-term turnaround?

In L.A., Tribune’s soon-to-be-owners similarly
may have little interest in staying the course. Maybe a L.A. combination, involving the Times around
lowered-cost, higher-efficiency publishing-- Singleton’s once and future trademark – is the way to go.

Anti-Trust, you say. Dean can find good attorneys to make
the case that it’s hard to see how bankrupt entities can dominate a
market!

For most of these companies, bankruptcy is just a re-set, a
way of buying some more time, as new managers or old ones try to come up with a
new strategy. Most of these companies bet on the come, taking on big debt, at
what turned out to be an imprudent time. Sure, Sam Zell’s move was laughable on
the face of it.The well-meaning
Philly and Twin Cities gambits were both cases of misunderstanding the bargains
the marketplace offered up. These weren’t distressed properties in a good
industry; they were distressed properties in a distressed and distressing
industry. For all, large debt is now seen as the anchor holding them back from a
fresh start.

The economics are fairly straightforward.

Recall a year ago when company after company had fallen into
a recession-ravaged operating unprofitability? Major staff, newsprint and
operating cost-cutting, and the easing of recession, got them back into the black,
month-to-month, many barely so. Yet debt service, once made possible by good
cash flows from existing and newly acquired properties, has become a major
barrier. Going-forward, within the new reality of the print-based news
business, it’s proven widely unsustainable to both maintain a large enough
business presence and pay off the debt. MediaNews will emerge with $165M in
debt, one-sixth of what it had on the books in December, producing a debt service
that seems much more doable. So,
even in 2010, the bankruptcies continue.

Given the harrowing last year publishers experienced – a
fifth of their business has disappeared in a single year, with little
likelihood of much of it coming back – 2010 feels
a bit better than 2009. Yes, it’s hard to know how accurate the feeling is.

Yes, this could be a plateau. Knocked down a couple of
notches, but standing tall on solid ground, dailies could move forward. Or it
could feel like a safe plateau and really be a ledge, a landing place offering
temporary comfort.

That’s the vantage point, partly obscured by rock and clouds
(the last visibility on budgeting was sighted around 2005, I think) as dailies
make a slew of vital decisions that will determine their fate. Call it the Fog of Media War. There’s precious
little wiggle room left, as publishers make such fundamental calls as:

Erect a paid content wall or not;

Bet on the tablet as the saving grace of the
time, and decide what that bet means they have to do;

Throw in their lot deeper with the winners of
the first-round news and ad aggregation, Google and Yahoo, or play them off
against the Apples, Sonys, Comcasts, Bloombergs and others making next-round
digital business moves;

Consort with Journalism Online, or Skiff, or
Microsoft, and/or re-direct the original consortium, AP

Re-consider the basics, and economics, of
content creation, as AOL-Demand-Helium-Associated Content-Examiner models upend
long-established notions of professional journalism creation.

As 2010 rolls out, that’s just the top of my list of the
real decisions that are in front of daily execs, in or out of bankruptcy. Tough
decisions, and ones better assessed from a broad Far West plateau on a
cloudless day, than on a ledge in the thick of a passing storm that’s left many
clouds on the horizon.

October 26, 2009

We knew that USA Today's early word of a circulation plunge -- 17%, announced by Gannett two weeks ago -- would probably be a sick canary in a dark coal mine.

Today's semi-annual circulation FAS-FAX numbers for U.S. dailies, though, are still breathtaking. On average, 10.6% down daily and 7.4% Sunday. That's on average, and largely twice as bad as the declines have been over the past four-plus years. Look at some of the individual results, and you understand why the New York Times just announced that it is taking another 100 jobs out of its newsroom and why other newsroom (and, of course, wider) cuts may increase -- not decrease -- as Wall Street indicates that an overall economic recovery will be a 2010 reality.

More of the same, though now with evidence of a tipping point. Inevitably, for the print product, less is less.

Newspaper readers have hung with their local papers through thick and through increasing thin. The value proposition they now see, though, is a lesser one: Smaller product, less news, fewer ads of all kinds, more e-reading choices -- and higher prices.

Yes, most newspaper companies have embarked on a premium print pricing strategy, in some cases doubling single-copy prices and upping home delivery significantly. And, yes, these increases have provided a circ revenue bump just as ad revenue tanked (both McClatchy (6.7%) and Media General (11%) recently reported quarterly circ revenue gains). Yet, they've made the value proposition for print harder to justify. Now, add the recession-induced pocketbook concern to all the greater changes in the news world, and publishers may have shone a spotlight on the print newspaper product.

They have moved it from being a necessity, a habit, to a discretionary buy. (More on the history of the ebbing habit, from Alan Mutter.)

It's been a tough formula, but one that did make a kind of sense. Acknowledge that newspapers are a niche buy (while Google, Yahoo, AOL and MSN have become the mass daily stop), and price accordingly. Take a hit in volume, but make it up in pricing. It looked like that strategy was working for the past couple of years, as circ revenue's been flat to slightly up at most companies.

The risk: Too many readers would opt out. One ABC survey isn't enough to tell us whether we've reached that point definitively, but it's a huge warning sign.

Put yourself in publishers' shoes, planning for 2010. Today's numbers tell them a couple of things, at least:

If fewer readers won't pay for print, can they get them to pay for new e-reading choices? They'll watch the Wall Street Journal's test of mobile pricing. They'll work with Journalism Online to see which digital value propositions have a prayer of working. They'll think hard about the Kindles, Nooks (good comparison with the Kindle by Gizmodo's Matt Buchanan on NPR), Ques and Readers, and how they can get news readers to pay for delivery through that new platform.

It's going to be harder to get a thick slice of the ad spending
returning to the marketplace, as the economy normalizes. Publishers' mass
market proposition, already weakened, is now further in question (more on cycle of decline, from Rick Edmonds). Their
pricing, always a sore point among advertisers, is now even harder to
justify among the proliferation of pay-for-performance ad choices. (Good piece by NYT's Stephanie Clifford on that.) As they look anew at their ad sales propositions, they'll need to double down on the notion of premium content, premium audience and superior targeting -- and give often skeptical ad buyers reasons to believe.

September 17, 2009

The sails are up, and news companies feel a little recovery wind at their backs. With the worst of cost-cutting over, they're looking for growth. Here's nine questions as they chart that new path.

1. Is one foot better than two? Newspaper companies are feeling a new vim and vigor, and their share prices reflect that. The last 12 months have felt as if someone was standing on their chests with both legs, one leg's is the challenge of the web for readers and advertisers. The other's been the recession. Now the recession leg is applying less pressure, and may be removed completely soon. In other words: Back to the challenges of 2007.

2. Doesn't Mediaspectrum's announced partnership with Tribune offer significant potential to the news industry? Saving money on ad pre-press (ad order-taking, ad design, etc.) is hardly sexy stuff, but Mediaspectrum's customers report savings of 25-50% in ad pre-press costs. That's huge, especially applied over an industry still beleaguered by cost structure issues. (We can see that news companies have cut 25-40% of their costs over the last three years in staff, paper and everything else, but more is needed as online-only rivals come at them.)

A little sexier -- and to the point of where news companies can find growth going forward -- is Mediaspectrum's self-service ad platform. I wrote recently about Advance's partnership with Microsoft around local sales, further ratification of the Yahoo Newspaper Consortium notion that it's all about enlarging local sales going forward.

"How you get more of your local businesses that we haven't gotten to before," is the big goal of the self-service platform, says vp/operations Mike Sacks. Sacks tells me that Tribune has gone live with the self-service ad platform in six of eight Tribune markets and has already brought in hundreds of new, smaller advertisers, ones that could never afford print and may not have been touched by the company previously.

So where does self-service fit for Tribune. "We're not firing salespeople; we're redeploying them to [sell] larger businesses." The system may allow the company to re-allocate as many as a fifth of its sales staff.

Now Tribune and Mediaspectrum, which also has made a believer of UK-based Trinity Mirror, are teaming up to sell the newspaper industry on ad self-service, launching a joint initiative today.

3. If Journalism Online takes off, will we see a pitched battle between Paypal and Google Checkout in the news world? Google has recently renewed its pitch to publishers, urging them to use Checkout to power their paid content strategies.Checkout has been aimed at micropayment initiatives, but it hasn't caught fire.

On the other hand, Journalism Online, which this week announced 1000 "affiliates" willing to keep talking -- and provide some potentially highly useful reader data -- about paid content, will probably focus on Financial Times-like "metering" approaches. That means subscriptions, rather than micropayments. And don't be surprised if you hear that JO's partners, as it goes operational with pay offers, will include Paypal and Zuora. Paypal, owned by eBay, of course has become an online payment standard. Zuora is a Paypal-partnered start-up with a good lineage (funded by Benchmark Capital and by Salesforce.com's Marc Benioff). It focuses on subscription marketing. Zuora's role: working with JO and news publishers to craft subscription products that readers might actually pay for. (Thoughts from Zuora founder K. V. Rao on subscriptions and the web, here.)

4. Isn't California Watch one of the models to really watch? The model is simple, fits the economics of the day and produces.....above-average journalism. What's not to like and apply? The 11-person California Watch unit -- funded by foundations and run by the OaklandBerkeley-based Center for Investigative Reporting -- hit a home run with its first project. That project focused on wasteful Homeland Security spending. It ran in 25 papers across California, from big metros to the small dailies, on indie VoiceofSanDiego.com and caught play on KGO-TV in San Francisco.

So: an independent, non-profit news operation produced well-done enterprise journalism and found a ready and eager audience of editors and readers. How tough was it to get daily editors to accept this journalism?

"It was incredibly uncomplicated," says CIR's Exec Director Robert Rosenthal, the prime driver behind California Watch. Learnings: "Our customers were the publishers. The easier you can make it for the publisher, the better." California Watch charged fees in the low hundreds and has found publishers and TV outlets asking, "What's next?"

That's the good question Rosenthal and his new merry band now get to answer, as they think through the kinds of reporting, the amount of cooperation and customizaton useful and the business models that will work as this new form of distributed journalism.

Among the principles being proven out: When established daily journalists leave big metro dailies, they take their cred with them -- and it looks like it is instantly transferred to their new enterprises.

5. Is Rupert Murdoch replacing Henny Youngman? Is it the
one-liners he is tossing out or is the press just starved for received
wisdom. Now Rupert, leader of the Free World's News Media, says he is going to charge a buck a month for WSJ mobile to
subscribers and two bucks for non-subscribers. I think that's a step in
the right direction.

Charging for non-desktop/laptop access should be a
new revenue stream for news publishers. The math, though, isn't huge.
Who is most likely to pay for Journal mobile? Presumably it's online
subscribers, of whom there are about a million. So $12 a year, if all
of them signed up, would be $12 million. Not bad, but only about an 8%
increase in reader revenue. I can't see lots of non-subscribers
shelling out $24 a year, but I may be wrong.

So $52 a year (my mistake: Murdoch is proposing a weekly charge of $2, not a monthly charge of $2), if all of them signed up. So, yes, if all of them went for the deal, that's a 50% increase in reader revenues. If News Corp gets half of them, that's $25 million or so a year, a 25% increase in reader revenues. I can't see many non-subscribers shelling out for the app.

Better than charging just
for mobile, I still think All-Access is the way to go: Get the Journal
(or the Times or Guardian or ?) anyway we produce it, print, desktop,
laptop, phone, e-reader, e-edition. And add a $5.95 per month charge
for that. All-you-can-eat model that Americans seem to love, even if they
don't often sample the whole buffet.

6. Is News Core the right bite of the apple? Lost in the flurry of news was News Corp's News Core announcement. Another unsexy one about bringing together all the company's news content -- think Journal, Barrons, Marketwatch, Times of London, Australian, Fox, etc. -- in one place. That's essential (core) to taking advantage of the scale News Corp has built. In digital publishing, it's all about content management, control and measurement.

If News Core can successfully harness its internal content, to multiply value of its individual content units (yes, new language for new times), it's got a leg up for its own destination sites, and for syndication out. This is one answer to the two-year-old question of how much Murdoch "overpaid" for Dow Jones in December, 2007. Yes, he "overpaid," but multiplying the value of those DJ assets through News Corp's worldwide pipes of distribution -- satellite, cable + print and web -- helps us all to see the value that can be unlocked.

In concept, News Core parallels Gannett's ContentOne, that company's attempt to reinvent an internal wire for the digital age.

Big question for these companies: How much of this activity is truly integrating content management on single platforms (Dow Jones is moving that way with Eidos Media) and how much is simply better sharing of old-fashioned budgets. It's the former that will pay huge dividends.

7. How much will the New York Times digital news operation miss Jon Landman? Landman gets it, a Timesman with commonsense. I've talked with him about staff blogging, for instance, and he is one of the too few people at the top of journalism who get that blogging is just another useful new tool in the journalist's bag. We can see that in the Times' growing comfort with blogging and multimedia, done to Times standards. Yes, it still seems too slow sometimes to many of us, but it's been directionally right. That said, let's see what he can do as Culture Editor online, where such innovations as NPR's Culturetopia podcast (often helmed by the capable Neda Ulaby) and Linda Holmes' MonkeySee blog are bringing the right sensibilities and selectivities to online culture journalism.

8. Is the NYT about to make a pay content decision? The ghosts of Times Select roam the new hallways. Membership notions abound. An ad rebound gives punch to those who say keep it free. Rupert's mobile upcharge offers another path. Word is that the Times may soon decide what it will -- and won't do -- with paid content in 2010.

9. Couldn't Walter Hussman have chosen better words? The Arkansas Democrat owner has proclaimed that his merger
with Stephens Media would create "a permanent solution" to both
companies' cost issues in northwest Arkansas operations.. The phrase
gives some of us the willies, in its finality. Besides, isn't it quite
clear that given the fast-changing landscape, there is little permanence
and everything is in long-term transition?

August 16, 2009

Update: MSNBC.com just paid several million to buy Everyblock, the much-watched Adrian Holovaty start-up, around local city data. Smart local interactive data should be a strong core of every local news(paper) site; it drives traffic and screams utility. The fact that MSNBC.com -- co-owned by Microsoft and NBC -- understands that opportunity better than newspaper companies speaks volumes. The deal also reinforces the notion, noted in the post below, that Microsoft will once again become a more dominant local, news-oriented player in the years ahead.

On Monday, Advance Internet is announcing its new partnership with Microsoft, an agreement that tells us a few things about the emerging, post-recession marketplace.

Advance Publications, Inc., isn't a well-known name outside the industry. Yet, it's one of the major media companies in the country, encompassing through Conde Nast more than 20 top-drawer magazines (The New Yorker, Wired, Vanity Fair, Gourmet+), the apparently immortal Sunday Parade, the 42-city strong American City Business Journals group and cable interests, in addition to its 30 newspapers. A very private company, Advanced is ranked 41st, by Forbes, among private companies in the country, taking in more than $7.5 billion.

So when Advance partners its online newspaper ad business with Microsoft -- when it zags when many of its peers are zigging -- it's worth taking note. The new partnership covers all the Advance newspaper properties, from Newark and Jersey City to Cleveland to Michigan to Portland, Oregon, with many in between. Advance Internet operates as a division, separate from the company's newspapers, but is set up to leverage all those papers' content and sales forces.

The new partnership -- already launched in part -- parallels the Yahoo Newspaper Consortium, but differs from it in one important respect.

What's the same:

Advance Internet's own salespeople, and then the vanguard of its
newspaper sales reps, will sell into the Microsoft Media Network,
encompassing all the Microsoft sites. So, in essence, Advance will
greatly expand what its sales teams can offer local advertisers. The idea and the centerpiece of the deal for Advance: the ability to offer local businesses additional marketing solutions, multiplying Advance's sales.

Advance Internet will use the capabilities of the Microsoft ad
technologies -- among them behavioral targeting (BT) and re-messaging
(following would-be customers as they move about the web)

The main difference: Advance Internet is maintaining its own ad platform, currently powered by 24/7 RealMedia, and integrating with Microsoft. Yahoo Newspaper Consortium members have fully adopted the Yahoo APT platform for their ad serving businesses, creating a closer, more exclusive relationship. "We wanted flexibility," Peter Weinberger, president of Advance Internet, tells me. Weinberger won't specify what parts of the deal involve exclusivity or the duration of the contract.

So, we can read the move in several ways:

First, Microsoft is really coming back -- to the newspaper world. After Sidewalk, after all kinds of attempted relationships, Microsoft -- soon to be half of the Google/Microsoft search duopoly -- is once again seeing the benefits of the newspaper company local connection. Advance Internet is
the first major local news company reselling display ads into the Microsoft
Media Network, Peter MacDonald, who is Microsoft's PubCenter Director of Business Development, Advertiser and Publisher solutions, told me. Haven't heard of the Microsoft Media Network? It was formed in February, rolled up from various Microsoft businesses, well-described here by ClickZ. Among the other big media companies named as collaborating on the new underlying PubCenter platform are IAC, Dow Jones Online, The New York Times Co., Time Inc., and Viacom.

With
the Advance deal, it gets good local sales potential -- those
feet-on-the-street that are the envy of companies that are
cubicle-bound and technology-centered. Recall that in the
Microsoft/Yahoo deal, Microsoft's Bing and paid search businesses will
power not only Yahoo, but apparently all the newspapers sites in the consortium.
That will mean that the majority of newspaper sites (with the big
exceptions of Gannett, Tribune, the New York Times and the Washington
Post, among others) will see critical parts of their business powered by
Microsoft. (Peter Krasilovsky notes that this deal, in the works before the MSFT/YHOO deal was done, may raise some political issues between the would-be partners.)

We all see the shape of the new battle for local ad dollars. Face
it, online newspaper growth has slowed dramatically. We're seeing
reading patterns harden in the marketplace, and it's leaving newspaper sites underwhelmed. Yes, they can claim as Advance does -- "according to Media Audit,
five of our sites rank in the top 10 of newspaper affiliated sites based
on local penetration of adults 18+" -- to be strong locally. But time on site across the news industry is paltry, less than 12 minutes a month in most cities, according to Nielsen data.
That means they must sell much more than tired old banners on their own
sites. The solutions, here and in the Yahoo consortium: 1) sell more
products, in addition to display; and 2) sell Other People's Inventory
and networks; in Advance's case, Microsoft's.

As I've noted, this new math is compelling -- many smaller advertisers never could afford print. They can afford online, and that means the potential of hundreds and thousands of new customers in every metro marketplace.

Further, this is a market newspaper companies must win if they have any hope of maintaining their already-downsized newsrooms. They're not winning it now. According to Borrell Associates, roughly half of the $14 billion local online ad market is going to the pure plays -- Google, Yahoo, Microsoft, AOL and smaller sites without legacy media businesses. Only a quarter of it is going to newspaper companies. Newspapers' strength is in non-targeted display advertising; they're minor players in the fastest-growing online ad segments of paid search and direct marketing.

If Advance and other newspaper chains see the local opportunity, they aren't alone. Yellow Pages
companies, with their own veteran feet, see it, as witnessed by the
recent ATT/Yahoo tie-up. (Content Bridges" "5000 New Competitors Just Landed in News Markets."
Broadcasters see the new markets opening as well -- all those small businesses
that used to be "too small to sell", businesses that have gotten a
taste of self-service keyword advertising, but would like some help in
putting together better, smarter campaigns. Both YP and broadcast
companies are part of the Microsoft reseller program that Advance just
joined, in fact. Conversely, Weinberger notes that with the new
programs "we can go after broadcast dollars."

July 29, 2009

The biggest story of the Microsoft-Yahoo search deal for newspaper companies: What the deal doesn't include.

In a full-blown merger of the companies or even a broader partnership, the more than 30 U.S. newspaper companies in the Yahoo Newspaper Consortium -- more than half of the country's press by Sunday circulation -- might have seen some major impacts. With the deal, finally announced this morning, limited largely to search, that impact is minimized.

In fact, the greatest impact may be addition by subtraction. Newspaper companies like being able to sell Yahoo.com inventory, a key part of the consortium deal. They are also figuring out how to purpose the Yahoo APT behavioral-targeting technology to better sell their own site inventory. What they haven't liked is the uneven implementation they've seen from Yahoo, a company making its first major foray into the Vendor Land.

So if the deal gets DOJ approval, if it gets done "early next year," then, maybe Yahoo will focus more on the business that is key to Yahoo's -- and its newspaper partners' -- future: BT-driven display advertising.

"We would expect that with Yahoo now focused on display advertising, the response [to newspaper company needs] should be stronger," Mike Silver, the Newspaper Consortium's executive director told me this morning. "We would expect more resources....Yahoo has been open on its calls that it underestimated what it would need to do on APT."

Search advertising does have an impact on newspaper companies. Most consortium members take Yahoo search and paid search, both services that would be replaced by Microsoft's new Bing and related products. The newspapers' paid search deal with Yahoo has provided a steady, if small, revenue stream -- guaranteed -- over the first couple of years of their agreement. Last I have heard, not too many had exceeded that guarantee. So when Microsoft replaces Yahoo search, which will give it a roughly 30% share of search combined, perhaps it can drive higher search pricing. Google, though, is clearly still the big dog here, so don't expect a lot of new revenue in this developing paid search duopoly world.

What the deal doesn't include is Microsoft's usage of Yahoo APT; the companies have said they'll go their own ways in selling display advertising. That's a missed opportunity, potentially, for newspapers. As they perfect the art of selling Other People's Local, it would have been good to be able to sell Microsoft local as well.

What the deal doesn't include is HotJobs, still being shopped by Yahoo, and still a major revenue driver for many newspaper companies. Lucrative recruitment packages, though clearly hurt by the recession, have contributed as much as half or more of Yahoo-related revenue for some of the companies.

What the deal doesn't include is more traffic generation, a good Yahoo benefit, as it gives preference to newspaper content. No Microsoft preference in this deal.

Of course, all of this could have been worked out quite differently if newspapers had ever really been a search player. They missed that boat, though, several times.

They mistook the web for a browse medium early on. Then, the old troika of TKG (Tribune/Knight-Ridder/Gannett) almost got into the search business, coming close to closing a deal for Kanoodle, a search player that they wanted to make their own and industry-wide solution. They walked away from the deal at the last minute, though, fearful they were overpaying for a slice of what has turned out to be a $10 billion plus ad segment (paid search alone). So instead, today, they find themselves bystanders, watching from the sidelines as two of behemoths mate.

July 23, 2009

Can you feel it? It might just be a bottom. Wall Street valuations of newspaper companies certainly indicate it might be. Those valuations have mainly been based on the earnings reports of the last week.

What sense do we make of the slew of newspaper earnings reports that "surprised" financial analysts, one after the other, Gannett, McClatchy, Media General, New York Times? Equally, what sense are publishers making of the results, as they spend this midsummer week deep in meetings, at today's AP board meeting, and at more NAA "Paid Content" sessions?

All companies "beat" expectations. What the expectations got right is that the deep revenue decline hasn't changed much. Look at the numbers, and you see the slightest moderation in decline, a couple of percentage points here and there.

Still, the revenue numbers would be astounding, if we hadn't gotten used to them.

Take the worst ones: recruitment, traditionally, one of the highest-margin categories. Gannett down 60%, McClatchy down 62.5%, Media General down 63%. (You can see in those numbers why Yahoo is shopping HotJobs and why it's not found the right buyer at the right price, after several months.) Overall, ad revenues are still down in the 25-30% range year over year. Online ad revenues are largely negative, brought down by their ties to print classifieds, which have yet to turn at all.

What the predictions failed to get right was how deeply newspaper companies have cut expenses. Consider these cuts, 2Q, 2009 compared to 2Q, 2008:

McClatchy: 29%

Gannett: 20%

Media General: 23%

New York Times: 20%

It is these cuts -- coming on a base that has been shrunken quarter by quarter for a couple of years now -- that brought the surprising results, the "return to profitability." Take the Times, for instance, cutting 20%, when in past quarterly sessions, CEO Janet Robinson has pointed to reductions in the 10% range. Similarly, look at Gannett's 2Q, 2008 expenses cuts: 6.3%. McClatchy 1Q, 2008 expense cuts: 10.5%. Media General, 3Q, 2008 expense cuts: 10%. What that tells you is that the fear of the marketplace and of lenders' wrath gave publishers new cost-cutting religion. They became born-again cost-cutters to get to where they needed to get to. Black.

That return to profitability -- emphasized in most of the stories on the 2Q earnings -- is another way of saying, newspaper companies may have found way to survive. They may have stabilized themselves sufficiently -- through massive and unprecedented cost-cutting -- to stay in the black on an operating basis. They have profoundly downsized.

If so -- and we've got to see whether our arrival at 9000 in the Dow and the general sense of relief, if not recovery, sticks -- then that's the first step for moving forward. For those companies carefully balancing repayment of debt with funding current operations, profitability means a little breathing room. Debt reduction -- $100 million at McClatchy (its share price now breaking the buck in a positive way), $45 million at the Times -- is still a dicey proposition.

If the current trend holds, though, the six bankruptcies we've seen in the newspaper business could be it for now. Lenders and newspaper execs have been working ever more closely for the last year; these kinds of results show a new path to sustainability, if not necessarily significant growth.

If this is a bottom, a return to black, it's but a reprieve, and I think most publishers know that. Now, they've got to do a couple of things. One is damage assessment. Just as Captain Kirk, old or young, had to do after taking a hit, assessing the nature of the damages to the Enterprise is job one.

June 09, 2009

Entrepreneurs Mark and Gary Stern announced today that, within 60 days, Detroiters will once again be able to get a newspaper delivered to their door seven days a week, though it will have neither the Detroit Free Press nor Detroit News name attached to it. The Sterns certainly have a mountain to climb to achieve the break-even, 150,000 circulation model they've set out as the goal.

The fact that the Stern brothers are even trying is what bears notice. It parallels a launch of another kind, a coast away. In March, Barbara Bry and Neil Senturia, wife and husband entrepreneurs, launched the San Diego News Network.

Yes, SDNN is an online site, while the Detroit Daily Press is a print product, with some secondary digital presence to come. Both, though, point to an emerging reality: The rapid shrinking of daily newspaper companies is beginning to leave vacuums in local markets and marketplaces. Entrepreneurs are assessing those gaps and moving to create products that will work -- profitably. Expect these announcement to only accelerate as we see an economic recovery take hold.

There's an irony in that, of course. Daily newspaper publishers have been making the point that the new economics of the news business simply won't pay for business (and staff and product) as usual. They are right, of course -- given their economics, but not necessarily the next guy's.

April 12, 2009

Maybe we've found an answer: get Dean Singleton, Rupert Murdoch, Eric Schmidt, Jeff Jarvis, Nick Carr, Mathew Ingram and Danny Sullivan in one room, charge admission and use the proceeds to pay for American journalism.

Last week may have shed as much heat as light on the trials and tribulations of the American press, as visceral responses to the state of the trade grew sharper.

We saw a number of newspaper sentiments, from enlightened to reactionary, conflated together, given their paid-fire presentation in San Diego, as a multitude of fighting words pouring into the debate from San Diego's Newspaper Association of America/AP board meeting confabs, and its aftermath. "Anti-piracy". "Copyright". "BS detectors". "Ads with narrative and engagement.” "OEMs, OPMs and VARs."

We've seen name-calling, thoughtful response and ping-pong intellectual matches that make your head hurt, like this one on the always-engaging Nieman Lab

To the debate, I modestly had added the notion of "Fair Share," a new business reckoning between search engine aggregators, led by Google, and major news producers, old and new. That reckoning, I suggested, should recognize that Google is getting too much value and news producers too little out of of the current relationship.

To my reckoning notion, I got a lot of response, with a wide spectrum of approval ("This is one of the most clearheaded, lucidly written analyses I've encountered regarding this situation") and disapproval (My fave, off Twitter: "I rarely agree with anything Ken Doctor writes.") Some dismissed the notion of righting news producers' relationship as "philanthropy." Far from it. I'm keenly aware of the separate battle over profit-seeking vs. non-profit journalism, and I'm an agnostic about that. Whatever produces more good journalism I favor, and there's no doubt it will be some mix of profit- and non-profit-based.

My Fair Share argument, though, has nothing to with philanthropy, and everything to do with plain old business.

In basic business terms, the news industry is a supplier - and an important one - to Google and the other search engines. In fact, it's a supplier/manufacturer (of traffic and ad revenue) relationship that has gotten out of whack, and is therefore useful for both parties to adjust. After all, manufacturers, too, have problems as their higher-quality supply lines dwindle.

Individual news companies, and here I mean the Politicos, the MinnPosts, the Techcrunches, the Global Posts as well as Media News, Gannett, New York Times, ABC and the BBC, have had relatively little leverage of late. Their inability to exercise leverage made sense historically.

Take us back in the news time machine to 1998, a nice tweener period, and one that predated many of the companies above. Legacy news companies -- big 'ole big iron media -- could sense that their dominant place in the world was being shaken a bit, but AOL, Yahoo, Lycos (!?) and a couple of others didn't seem like Big Brother. So that legacy news industry had to tread lightly in pressing its case -- anti-trust seemed real for an industry in part built on city-by-city monopoly.

In 1998, Google was born, and in the decade since the roles have been reversed. What was city-by-city monopoly has splintered, with local and regional advertising marketplaces much more diverse.

On the other hand, Google, in particular, has become the gateway of our times, making a can't-refuse offer. It is the number one sender of traffic to news sites -- 25-35% as a rule. In saying that news companies are free to tell Google not to index them, and that Google will be glad to comply, you can practically hear the smile behind the statement. It's like Microsoft telling suppliers they were welcome to work with others if they didn't like the rules on Windows partnership. It's a choice that's not really a choice at this point.

So as suppliers -- and here again I look broadly from AP and Business Week and USA Today to The Huffington Post to PaidContent to Demand Media -- it's about renegotiating the supply relationship.

It doesn't mean having to erect pay walls. It doesn't mean a pause in radically reorganizing and rethinking news companies structures and products in this new hybrid age. it doesn't mean philanthropy. It doesn't mean calling Google evil or denying its genius. It doesn't mean limiting the free flow of content and debate on the web.

It is about re-setting a new relationship of trust, trust that there's some equity in the deals.

In the always quotable expression of Michael Corleone, ""It's not personal, it's just business."

So, let me suggest four forces that will move the recent web parlor talk into action this year. Each of the forces will have an impact on each other, and it's impossible to say at this point, which will have the greatest impact.

December 16, 2008

As the Great Detroit Experiment begins, the industry owes them for acknowledging the obvious. As Lou Mleczko, president of the Detroit Newspaper Guild Local 22, reported:

"And [Detroit Media Partnership CEO David] Hunke said, if we don't do this, the
current model is unsustainable. So he'd rather take the calculated risk
of going to a new format -- rather than sit back and do incremental
cutbacks."

Unsustainable. In other words, the business model is broken. The cracking we've been hearing are the default roars and whispers coming out of the companies and the lenders. Tribune's bankruptcy made a hole in the ice and now the idea of doing business as usual in 2009 seems increasingly unthinkable.

So Detroit, our newspaper Detroit, is going green. Green as in aiming for a sustainable, profitable model. Green as in fewer felled trees and more pixels. Green as in new green tech fresh, in line with the times with the change in Presidential Administration. Expect many more papers to soon follow the trend, as it appears that about half of the top 50 papers are now unprofitable.

It's a startling plan, even though we expected it. We'll debate the details and the chances of it working, but one fact is clear: A major American city will essentially see its daily newspaper(s) disappear. The Free Press and the News, as print products, won't completely disappear on certain days of the week -- a one-section product will be available on the streets -- but the institution of the daily newspaper is disappearing in Detroit.

What we know about the Detroit plans is this:

The Free Press will be home-delivered Thursdays, Fridays
and Sundays, while The News will be home-delivered
Thursdays and Fridays, probably starting in March.

The papers will print one-section street editions
on the days without home delivery.

The papers will push daily replica e-editions harder, associating them with the new three-day-a-week subscriptions.

There will be no immediate newsroom layoffs, but overall job cuts would reach about 10%.

So Gannett, the healthiest of the big newspaper companies, and MediaNews, highly leveraged and walking on debt eggshells, decided it was time to flip the switch. Freedom's East Valley Tribune is flipping the switch Jan. 7, moving from a six-day daily to a four-day "daily" in print and urging readers to move online every day for the freshest news. The Christian Science Monitor ("The Monitor Flips the Switch") going online, save one weekend paper, in April.

So will it work?

Let's take a quick look at the moving pieces:

The Savings: Figure that production costs amount to about a third of newspaper costs. This move will significantly reduce those costs.

The Circulation Revenue Loss: Circulation has contributed about 20% of newspapers' revenues. So the partnership will take a double hit here. It will charge a bit less for reduced-day print subscriptions, and inevitably numerous subscribers will opt out.

"New" Daily Digital "Editions": The papers' will be pushing daily electronic editions, but don't expect that these will produce much in revenue. These editions, powered by companies like LibreDigital (nee Newsstand), Olive Software and NewspaperDirect, have had greater success in captive Newspapers in Education programs than in consumer acceptance. They are essentially counter-intuitive products: older readers who may like the idea of "reading the paper" in its traditional format don't like reading online; younger readers who like reading online find it nonsensical to read yesterday's news -- and pay for it -- when they can news of the moment free online.

Ad Revenues: We've seen Monday and Tuesday papers especially hollow out in advertising. The bet in Detroit, in Phoenix and soon in many other cities -- most newspaper companies are now talking about flipping the switch as well -- is that papers can hold on to the lion's share of the print revenue within the remaining print publishing days. The big question: what percentage? Will three days a week in print be enough to hold 75% or 90% of print ad revenues? Those are the metrics that will determine "sustainability."

New Products: The partnership employed IDEO, a brilliant company that often gets to the heart of marketing for customers from Samsung and Procter & Gamble to the Mayo Clinic and Oxfam. In its release, the partnership cited all the digital add-ons, mainly niche plays, that will be added in Detroit, from Gannett's MomsLikeMe and Metromix to HighSchoolSports.net to niche fashion print. It's a catalog of what the industry is trying in the great transition. Many are good ideas, but none are home runs. It's a game of singles at this point.

The biggest moving piece here though is habit. It's elusive. Newspapers' great success and great profits grew out of their dailiness, as addictive as cigarettes, without the nicotine. Readers got used to picking one up daily and advertisers got used to using their dailiness to market. As the Detroit newspapers, and others, flip the switch, they're also hitting the circuit breaker. That current of electricity that flowed in the commercial and community information marketplaces is being disrupted, and the disruptors -- from Yahoo and Google on the one hand to CNN, Politico and Huffington Post on the other -- now find they'll be competing with the old newspaper companies on more even ground, but without the legacy costs.

So this move pushes two newspapers at least into deeper competition in the digital marketplaces of the day, marketplaces they have had mixed, and often underwhelming, success in. That's why today's announcement, as intriguing as it is, is probably just another step in the ongoing shrinkage of the US press.

December 08, 2008

If we still have the capacity for amazement, after a year of subprime meltdown, worldwide recession and the election of Barack Obama, Tribune going banko would be stunning. Its filing reminds us that no news brand is sacred; that we really have no idea what the 2015 news landscape will look like. It's now more imaginable that Tribune papers, and the Tribune itself, can go away, like its former kissing cousin, Knight Ridder.

Still, the bankruptcy option looks to me like just another phase in the Sam Zell strategy. Julie Moos has a good chronology of the Tribune saga, on the Poynter site. I'd sum up his brief year of ownership in four plans:

Plan A: Assume you're smarter than the other guy. Sam Zell, aka the Grave Dancer, thought he was buying a distressed property in a not-unhealthy industry. In fact, he was buying a distressed property in a distressed industry. The normal bottom-feeder drill of buying low, cutting back significantly and then improving margins didn't work. His innovation efforts -- mostly embodied by redesigns that made no significant difference to circulation or advertising -- missed the point of how much the Internet has changed the news business. He tried applying '80s thinking to a generation-next opportunity. He under-estimated the 2008 newspaper economy, ignoring his own company's 2007 performance. Grade: D.

Plan B: Start selling assets. Zell gets his gold star here.He managed to set one of the few competitive newspaper auctions in recent memory, finally unloading Newsday for Cablevision for $650 million, after Rupert Murdoch and Mort Zuckerman bid up the property. He failed, though, to move on selling the L.A. Times to a very interested David Geffen. He delayed his own sale of the Cubs, by pursuing a misguided attempt to sell Wrigley Field to the State of Illinois. By the time he turned around, the credit market had frozen up, Mark Cuban found a new date with the SEC, and selling newspapers has become near-impossible, as a number of formerly high-value properties languish on the market. Further, he'd assessed selling the real estate in, around and under his newspaper properties. There, too, though the twin crashes of commercial real estate and credit foreclosed that possibility. Grade: C+

Plan C: Re-negotiate with lenders. Somehow Citibank, Bank of America, JP Morgan Chase and Merrill Lynch had bought into Zell's poor projections, and the new Tribune emerged with $13 billion in debt. Zell apparently tried reordering some of his debt, threatening today's bankruptcy filing. The filing tells us he was unsuccessful. Curiously, his brethren in the industry have had more success at that, probably due to their lesser leverage and greater confidence in their abilities to run news companies. Gannett, McClatchy, Lee, MediaNews and and others have all moved on debt restructuring, paying high interest rates in some cases, but gaining more flexibility. Grade: F

Plan D: Go bankrupt. We believe that employees' 2008 contributions to the phantom ESOP are all but history. We're unsure where Zell's own investment stands. We do know that bankruptcy will unleash all kinds of reassessment of Tribune holdings, and possibly allow altering of collective bargaining agreements. Short term, the bankruptcy won't be the kind of calamity it might have be for General Motors; newspaper advertisers and readers are making a short-term buying decision, not guessing whether their five-year warranty will still be backed up. Grade: A

You can look at each Plan, A-D, essentially as part of the larger plan of Buying Time. Sam Zell didn't expect to run through A, B, C and D, in less than a single year (He closed the Tribune deal on Dec. 21, 2007.) But the man knows how to move assets around to buy time. His problem is that he's had a weak endgame. Every time he sells an asset, he loses cash flow. Every time he loses cash flow, he's less able to meet debt. That's more a dead-end than an endgame, but he thought he could play it long, maybe past the 10 years it takes to get a good payout on an ESOP. The clock now says he'll have to think differently.

Buying time, though, is what everyone in the newspaper industry is doing. The New York Times did it today as well, mortgaging its landmark building for $225 million. Scripps is doing it by "selling'' the Rocky Mountain News. All the companies are doing it as they refinance their businesses with lenders.

Buying time for what, when? That's the bigger question. 2009 looks to be dismal, with ad projections down as much as 6% over 2008, as offered at today's UBS Media gathering. So all publishers can do is get their enterprises from the dismal today to an uncertain tomorrow. Strategy is one thing. Buying time is another, and that's what today's news is all about.